AdHealth, Ltd. v. PorterCare Adventist Health Systems: Unambiguous Definition of “Medical Incident” Limits Coverage to Individual Patient Claims

1. Introduction

In AdHealth, Limited v. PorterCare Adventist Health Systems, 10th Cir. No. 24-1273 (May 2, 2025), the United States Court of Appeals for the Tenth Circuit addressed a dispute over how many patient‐claims can be grouped as a single “medical incident” under an excess‐liability insurance policy.

Background: PorterCare Adventist Health Systems (“PorterCare” or “the hospital”) discovered in early 2018 that its sterilization procedures were unsafe. Over the next two years it faced thousands of patient suits—some alleging infections, others emotional distress from exposure to risk. Total liability exceeded $40 million.

Key Issue: Does the policy’s “medical incident” definition allow PorterCare to group all sterilization‐related claims into one incident (triggering a single $40 million limit), or does it require treating each claimant’s injury as a separate incident (triggering separate $25 million and $15 million excess layers per patient)?

Parties:

Plaintiff‐Appellee: AdHealth, Limited (excess‐liability insurer)
Defendant‐Appellant: PorterCare Adventist Health Systems (hospital insured)

2. Summary of the Judgment

The Tenth Circuit affirmed the district court’s grant of summary judgment in favor of AdHealth. The appellate panel held that the policy’s definition of “medical incident”—which states that “any such act or omission, together with all related acts or omissions in the furnishing of such services to any one person, shall be considered one medical incident”—is unambiguous. Under ordinary contract‐interpretation rules (Colorado law), that language restricts each medical incident to the injuries of a single patient. As a result, AdHealth’s duty to pay arose only for individual claimants whose liability exceeded PorterCare’s $2 million self‐insurance retention, not for the aggregate of all claims stemming from the systemic sterilization failures.

3. Analysis

3.1. Precedents Cited

Harris Methodist Health System v. Employers Reinsurance Corp. (N.D. Tex. 1997) – Interpreted a nearly identical “medical incident” clause to limit coverage to each patient’s claim, even when a single negligent agent exposed multiple patients to bloodborne pathogens.
John Patty, D.O., LLC v. Missouri Professionals Mutual Physicians Professional Indemnity Ass’n (Mo. Ct. App. 2019) – Held that a mother’s and newborn’s malpractice claims arising from the same cesarean section were separate “medical incidents” because the policy defined incidents in terms of injuries to “any one person.”
Cyprus Amax Mins. Co. v. Lexington Ins. Co. (Colo. 2003) – Reinforced that under Colorado law, policy terms are given their plain and ordinary meaning unless ambiguity appears on the face of the contract.

3.2. Legal Reasoning

The court applied traditional contract‐interpretation principles:

Plain‐Meaning Rule: The policy’s language is read in its ordinary sense. The key provision states:
“Any such act or omission, together with all related acts or omissions in the furnishing of such services to any one person, shall be considered one medical incident.”
The inclusion of “any one person” unambiguously confines a “medical incident” to the treatment of an individual patient.
No Ambiguity: Since both parties offered reasonable but competing readings, the question was whether the clause was “fairly susceptible to more than one interpretation.” The court determined it was not; its natural reading precludes grouping multiple claimants.
Rejection of Contextual Overrides: PorterCare argued that the first half of the definition, referring to “any act or omission…which results in injury to a patient,” allowed multiple claimants. The court held that the “any one person” limitation in the second half controls and cannot be ignored or rewritten.

3.3. Impact

This decision clarifies for policy‐holders and insurers that, under similar policy language, large‐scale medical‐practice failures will not automatically be treated as a single, high‐value incident. Institutions facing mass exposure suits must:

Negotiate explicitly for “aggregate incident” coverage if they wish to group related claims under one policy limit.
Reexamine their self‐insurance and excess‐layer structures to ensure adequate protection when thousands of patients are potentially affected.
Anticipate that insurers will strictly enforce “per‐person” language in professional‐liability contracts, potentially reducing carriers’ exposure to catastrophic aggregation.

Insurers, in turn, will see a green light to enforce “any one person” clauses and avoid aggregation of related claims unless explicitly contracted otherwise.

4. Complex Concepts Simplified

Captive Insurance: A captive insurer is an insurance company wholly owned by the insured (or its parent) to cover that entity’s risks.
Self‐Insurance Retention (SIR): The amount a policy‐holder must pay out of pocket before excess coverage attaches. Here, PorterCare retained the first $2 million per incident.
First‐ and Second‐Layer Excess Policies: After the SIR, AdHealth’s first layer covered up to $25 million, and the second layer covered the next $15 million per medical incident.
Reservation‐of‐Rights Letter: A carrier’s notice to the insured that it will defend or indemnify under protest, preserving its right to disclaim coverage later.
Summary Judgment: A procedural device under Rule 56 of the Federal Rules of Civil Procedure that resolves a case when there is no genuine dispute of material fact and one party is entitled to judgment as a matter of law.

5. Conclusion

The Tenth Circuit’s ruling in AdHealth v. PorterCare establishes a clear precedent: policy language tying a “medical incident” to “any one person” cannot be read to group multiple claimants into a single incident. The decision reinforces the primacy of plain‐meaning contract interpretation in insurance disputes and underscores the importance for large healthcare providers to secure explicit aggregate‐loss coverage when facing systemic failures that affect numerous patients. Future litigants and drafters of professional‐liability policies will now look to this ruling as the benchmark for interpreting per‐claimant limits.